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4 ways small-business owners can control health benefit costs

4 ways small-business owners can control health benefit costs

If you're a small-business owner who's concerned about rising health care costs for your employees, you're not alone.

According to a 2014 report released by Bank of America, 72 percent of small-business owners are worried about health care costs.

Learn your responsibilities for providing health care coverage and four ways to reduce costs for your business.

Your health insurance responsibilities

Under the Affordable Care Act (ACA), employers with up to 49 full-time employees are not required to provide health coverage. Currently, those with 100 or more employees must offer coverage. And starting in 2016, that benchmark is lowered -- those with 50 or more full-time employees must offer coverage.

There are many benefits to offering health insurance to your employees:

  • Avoiding the penalty. If you're required to offer coverage and you don't, you'll be charged a penalty that is charged through your taxes.
  • Attracting and retaining top talent.
  • Potentially qualifying for a tax credit worth up to 50 percent of premium costs.
  • Paying for benefits in lieu of higher salaries.
  • Reducing sick leave and improving employee morale.

Whether you're required to offer coverage or not, here are four ways to keep your health insurance costs low.

1. Shop around for better rates.

Open enrollment begins Nov. 1 each year, and it's an opportunity for policyholders to review coverage and evaluate costs. If you're unhappy with your policy, then compare costs for several plans along with the Summary of Benefits and Coverage, and consider your employees' needs.

"Partner with a professional employer organization or hands-on adviser who is knowledgeable, active, and has the online and in-person resources to assist," says Mark Sinatra, CEO of Staff One, a Dallas-based human resources outsourcing company. Acquiring professional help will help you get the best rates.

If you're happy with your current provider but are unhappy with the rates, then you can try to renegotiate your contract. Negotiations will go especially well if your employees didn't spend a lot of money on health care the previous year, which is determined by charges made to the insurance company.

2. Implement a wellness program.

Wellness programs are initiatives that support physical, emotional and mental well-being for employees. They can also be a good way for small businesses to reduce insurance costs because healthy employees mean less money spent on medical payments, which can in turn lower your premium costs.

According to a 2014 RAND Corp. report, wellness programs save employers an average of $30 per employee per month. If you run a wellness program throughout the year and see tangible results, then you can use this as a bargaining chip when it's time to renegotiate your contract.

Wellness programs can also boost morale and community engagement. They lead to a happier and more fulfilling office environment.

3. Provide a narrowed network.

Rather than paying for a comprehensive insurance plan, you can choose a plan that includes a select number of providers at a discounted rate. The ACA dictates that your plan still must cover the 10 essential benefits and fulfill other requirements.

"Narrowed networks allow for a more affordable plan option if the employee is open to choosing a physician within the narrowed network," says Susan Duane, a health benefits adviser at Duane Benefit Solutions of California.

Employees can still choose to pay more for a physician outside the network.

4. Forgo benefits, or offer alternative coverage.

Employers can shop for plans through the Small Business Health Options Program, which is available for employers with fewer than 100 or 50 full-time employees, depending on the state.

The percentage of employees who must enroll in the SHOP plan varies from state to state, according to Zane Benefits, an insurance provider that specializes in small businesses.

Health reimbursement arrangements provide another option for employers who aren't required to, but would like to, offer coverage. Employees would select and enroll in an individual plan and access premium discounts through the subsidy program, and employers reimburse employees up to a customized amount, usually included with payroll.

And if you're not required to offer health insurance benefits, you can choose to not offer them at all. Some businesses select this option when their revenue doesn't allow for this expense.

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